Slide 1: Gamma FY Results 2018
=: Gamma Clear. Creative. Communications. Gamma FY Results 2018 Andrew Taylor, CEO Andrew Belshaw, CFO
Slide 2: Agenda
FY 2018 Performance highlights & business update Andrew Taylor FY 2018 Financial Review Andrew Belshaw Gamma 2023 Strategic Plan Andrew Taylor Business Outlook and Priorities Andrew Taylor Q&A 2 © Copyright Gamma 2018
Slide 3: Performance Highlights & Business Update
Performance Highlights & Business Update
Slide 4: Strong financial performance
Strong financial performance: Revenue £284.9m (+18% against FY2017) EBITDA £48.3m (+34%) Adjusted EPS 30.3p (+31%) • Strong growth across all key products in the UK, with an ongoing focus on upselling and cross selling across all sales channels • Indirect business grew very strongly – strengthened o
Slide 5: Product Performance
Product Performance
Slide 6: Product Unit Growth in 2018
Unit Growth Product in 2018 Comments SIP Trunking 680k to 856k • 6% Market Growth over the period* (+26%) • Margins consistent with previous periods • Consolidated No 1 position in the market – growth in market share, now at 29% market share • Increasing sale of SIP Trunk Call Manager, representing
Slide 7: Product Unit Growth in 2018
Unit Growth Product in 2018 Comments • Good growth in a mature market – small market share of 3% Business 76k to 94k • 2.5% market growth (Business Broadband Market) during the period Broadband • Cost base reductions throughout 2018 enabling keener pricing to improve (+24%) competitiveness whilst ma
Slide 8: Business Unit Performance
Business Unit Performance
Slide 9: Channel: 74% of Group revenue
74% of Group revenue – £210.6m (2017: £184.9m) Active Channel Partners grew from 1,089 to 1,150 – Focus moving more towards “doing more” with existing partners Focus continues on enabling partners to take a larger share of the business market with targeted cross sell and upsell programmes Revenues c
Slide 10: Direct: 25% of Group revenue
25% of Group Revenue – £70.9m (2017: £57.1m) Several new contract wins including ALDI (UK & Ireland), BGL Group, John Lewis Partnership and The London Stock Exchange Group. Significant increase in contracted revenue and margin backlog in both H1 and H2, providing positive growth through 2019 Achieve
Slide 11: The Netherlands Market
• The Dutch cloud telephony market is highly attractive (4th largest in The Europe with 28% penetration) Netherlands • The Netherlands is an attractive location to start the expansion to Market other key European markets • A clear market challenger, with a product portfolio very similar to Gamma’s (
Slide 12: FY 2018 Financial Review
FY 2018 Financial Review
Slide 13: Strong growth – Revenue up 18% to £284.9m
Strong growth – Revenue up 18% to £284.9m (mainly organic EBITDA up 34% to £48.3m Adjusted EPS up 31% to 30.3p Cash generated by operations up 36% to £40.6m Dividend up 11% to 9.3p Cash balance £35.3m as at 31st December Note that all figures are stated under new accounting policies and classificati
Slide 14: Changes in accounting standards and presentation
Growth Years ended 31 December (£m) 2016* 2017** 2018 17 vs 18 Revenue 213.5 242.0 284.9 17.7% Changes in accounting standards and Cost of sales -114.7 -133.3 -152.7 presentation – little effect on EPS Gross profit 98.8 108.7 132.2 21.6% Gross profit margin 46.3% 44.9% 46.4% Netherlands included for
Slide 15: Traditional business decline slowed; growth business continues
Revenue £m 250.0 200.0 150.0 Growth 100.0 Traditional 50.0 Traditional business decline slowed; growth business 0.0 continues to grow at same pace 2016 2017 2018 SIP and Cloud PBX continue to grow strongly Gross Profit £m 120.0 100.0 Data performing well in price-competitive market 80.0 60.0 Growth
Slide 16: Direct business continues to grow fast
80.0 Revenue £m 60.0 40.0 Growth 20.0 Traditional 0.0 Direct business continues to grow fast, driven by Enterprise 2016 2017 2018 and Public Sector Gross Profit £m 35.0 30.0 Slight improvement in margins (2017 : 45.0%; 2018 : 46.3%) 25.0 as mix settles 20.0 Growth 15.0 Traditional 10.0 Revenue by Se
Slide 17: Netherlands contribution to revenue and EBITDA
£3.4m contribution to revenue in 2018 and £0.3m of EBITDA EBITDA offset by costs of European acquisition strategy of £0.7m Pro-forma trading figures for FY 2018 (Dean / Nimsys combined) – Revenue £17.0m; EBITDA £2.3m Dean acquisition costs – EUR 13.2m paid; max will be EUR 27.0m based on 7.5x 2019 E
Slide 18: Remain debt free with strong cash reserves
Balance Sheet as at 31 December (£m) 2016* 2017** 2018 Non-current assets (incl. PPE) 45.3 57.3 90.3 Receivables and 42.9 64.8 69.0 inventories Cash 28.2 31.6 35.5 Remain debt free with strong cash reserves Current assets 71.1 96.4 104.5 Total assets 116.4 153.7 194.8 Cash conversion was c90% but no
Slide 19: Adopted IFRS 15 and IFRS 16
Adjusted EBITDA Adjusted EPS (FD) Adopted IFRS 15 and IFRS 16 – 2018 2017 2018 2017 the latter early and only Consistent with 2017 presentation and £m £m Growth p p Growth affects 2018 accounting policy 54.6 41.6 31% 34.0 24.6 38% Changes due to presentation Share Based Payments (“SBP”) no - Share B
Slide 20: Changes also affect cashflow classifications
Cash generated by Conversion of EBITDA Changes also affect cashflow operations classifications 2018 2017 2018 2017 £m £m Growth Consistent with 2017 presentation and CPE no longer capital spend – accounting policy 48.0 38.8 24% 88% 93% effectively shown as deferred payment Changes due to accounting
Slide 21: Gamma 2023 Strategic Plan
Gamma 2023 Strategic Plan
Slide 22: Product and Network Quality
Product and Driving innovation and on the back of strong network and product foundations Network Quality (carrier grade, high availability, and rock solid end-user performance) Channel Portal capabilities (built around the channel with overlay support geared to make Automation Gamma easy to do busin
Slide 23: Strategic priorities: UCaaS, Europe, digital
1 Evolve our strong cloud telephony position into the UCaaS market Build on our Fixed and Mobile Telecom strength to differentiate our 2 proposition from pure OTT’s 3 Expand to Europe to gain continued growth and scale 4 Continue to build on our digital capabilities to assure agility and sustain com
Slide 24: Fixed, UCaaS and Mobile proposition
Fixed UCaaS Mobile data APIs Office suites Collaboration & Conferencing Hosted PBX (Call management) • Broadband • 4G • Ethernet • 5G VoIP Telephony • WAN Services • WiFi Services VoIP bundled SIP Trunking with Hosted PBX Core network PSTN interconnect & local connectivity 24 © Copyright Gamma 2018
Slide 25: UCaaS service layers
APIs • Word processing, Spreadsheets, Slide presentations Office • Collaborative creation and edition 4 suites • • Email Calendar • Real time voice and video conferencing, screen-sharing, whiteboarding • Instant Messaging, file transfer, Presence 3 Collaboration & Conferencing • • Task management Em
Slide 26: SIP wave to Cloud UCaaS wave
SIP wave Cloud UCaaS wave Simple VoIP Telephony wave Full stack Integrated Telephony VoIP bundled with experience Hosted PBX Mid-term Long-term Source: Outvise analysis 26 © Copyright Gamma 2018
Slide 27: Network and cloud architecture
Public Cloud/ SaaS Voice & Data WiFi LAN BB ethernet Managed devices Mobile RAN Core Network Private Cloud PSTN 27 © Copyright Gamma 2018
Slide 28: UCaaS assets and European market opportunity
Gamma has developed unique UCaaS assets and know-how in the most advanced European market Other European countries are now following the UK cloud telephony migration path, creating a significant 28% market opportunity for Gamma 22% 6% Gamma has started its geographical 11% 7% expansion with the acqu
Slide 29: Business Outlook and Priorities
Business Outlook and Priorities
Slide 30: Outlook continues to be positive
Outlook continues to be positive, driven by strong Key Product development activities include: growth drivers across our key products and markets • Collaborate launch scheduled for 19th March 2019 • Horizon subscription framework Momentum in SIP Trunking is expected to continue in • Horizon active d
Slide 31: 31
31
Slide 32: Appendix
Appendix
Slide 33: Fixed voice market will fall at 3% CAGR
£bn 3.0 2.8 2.8 -3% 2.6 CAGR 2.5 2.4 2.4 2.3 2.2 Fixed voice market will 2.2 2.1 fall at 3% CAGR -9% Traditional voice CAGR will fall at 9% CAGR IP voice will grow at 10% CAGR +10% CAGR 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Note: VoIP telephony market is the sum of SIP trunk market
Slide 34: Trunks and seats market share
8.9 Total trunks m, Gamma market share Total seats m, Gamma market share 7.8 Value migration from SIP 1a to UCaaS 1b 6.6 Gamma has a 29% market share of the UK SIP market Gamma has an 11% market share (and 24% in the SME market) 5.6 4.3 4.0 4.8 3.8 3.6 Gamma disrupted 3.4 the market 3.9 3.0 2.7 3.2
Slide 35: PBX market shift to UC hosted PBX
100% 5% 8% 11% 13% 90% 20% 24% 29% 33% 80% 37% 42% 40% 46% 70% 43% 46% UC hosted 60% 49% PBX 50% 50% 50% 50% 40% 50% 50% 50% 30% 55% 50% 49% IP PBX 20% 43% 38% 31% 26% 10% 22% 17% 13% 8% 0% 4% TDM PBX 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 35 © Copyright Gamma 2018
Slide 36: UK UCaaS market growth and penetration
£bn, 2009-2023 +11% 3.3 CAGR 3.0 2.8 2.6 2.3 2.0 1.7 1.4 1.1 0.8 0.6 0.4 0.2 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 22% UK UCaaS Market penetration1 49% 1 UCaaS penetration measured as “Cloud telephony seats”/Total PBX market seats; 100% = 19m seats Sources: Analysis Mason,
Slide 37: Horizon Collaborate
Horizon Collaborate What are we launching?
Slide 38: New Services
New Services Application Sharing Conferencing Instant Messaging Presence Video Desktop Client Mobile Client (Mac & Windows) 38
Slide 39: Very large market with 123m seats
£bn 12.2 12% CAGR 11.1 10.2 Very large market with 123m seats and £6.8bn 9.1 8.0 Growing at 12% CAGR 6.8 5.6 16% Market penetration 4.6 3.7 At least two years behind UK and Netherlands 2015 2016 2017 2018 2019 2020 2021 2022 2023 UCaaS1 Market penetration 37% 16% Total market potential of 123 millio
Slide 40: Improve customer experience
We have an opportunity to lead the provision of an end-to-end Improve customer communications portal for the business market that evolves experience with channel and user behaviors Improve ability to launch / Ability to increase rate of innovation, based on more flexible adjust products fast and aut
Slide 41: © Copyright Gamma 2018
41 © Copyright Gamma 2018